Client created the LLC (single member) for their rental property. That's an easy schedule E, no problem. Now they've put their own house in the LLC because they want to deduct all the expenses like insurance, repairs, plus mortgage interest and taxes, so they starting paying rent to the LLC. I think this is nuts.

As I see it they have none of those deductions for the residence (unless they take taxes and interest on sch A)  and they are generating taxable income to their own LLC from their own money plus losing the 121 exclusion if they sell.

Am I missing something?